MUMBAI: Startups in hotel industry are diversifying to offer new services after initially focusing on just standardizing accommodations, a move aimed at broadening their business in a bid to boost revenues. Deyor Rooms recently diversified into offering camp sites to corporate and leisure travellers, for instance, while budget accommodation startup WudStay started offering paying guest accommodation and retirement homes about four months ago.

Similarly, sensing the demand for affordable meeting spaces among working professionals, budget hotel aggregator Vista Rooms has launched a network of business centres at its partner hotels.

According to experts, addition of new services is critical for the success of such businesses in the long term. "It makes logical sense to enter niche and untapped segments which are connected to accommodation and follow the same business model," said Dheeraj Jain, cofounder of Deyor Rooms. "Since we already have a backend setup for the hotel business, it doesn’t take much time to start leveraging the same to offer new services," said Jain, who is also a partner at London-based hedge fund Redcliffe Capital.

In the past couple of years, several startups have come up in the accommodation business and taken up the challenge of standardising smaller and standalone hotels. Moreover, in a bid to incentivise and attract customers, aggregators have been offering their properties at lower price points, a practice that puts pressure on revenue. "With these newer segments, there is consistent revenue flow and we have all the elements such as contracting, operations, etc. in place which helps in easily diversifying," said Prafulla Mathur, founder of WudStay.

Diversification helps not just such startups but the hotel owners as well.

Ankita Sheth, cofounder at Vista Rooms, said offering new services helps maximise revenue streams for the hotels. "Our partner hotels’ kitchens have excess food, so the idea is to utilise that and use food tech platforms to distribute that food which is an additional revenue stream for the hotel," said Sheth. The company aggregates its listed hotels’ kitchens to prepare food, which it sells under its own brand.

While startups earn a margin of 15-20% in aggregating hotels, these niche segments could get them margins as high as 40%. Jain of Deyor Rooms said margins in camping business, for instance, are five times higher than that in the hotel business. The diversification into new areas also helps improve the customers’ stickiness to the startup brands.

But while companies such as WudStay, Vista Rooms and Deyor Rooms have been quick to enter new segments, others such as Treebo Hotels are still sticking to the accommodation segment. "There is a lot to do in the hotel space as the core problem of quality is yet to be solved. So we are focusing on this segment and in a few years, we might look at alternate accommodation segment," said cofounder of Bengaluru-based hotel startup Treebo.